SWS accepts new €60m IAWS offer

THE board of South Western Services (SWS) of Bandon, Co Cork yesterday accepted a €64m offer from IAWS Co-op for its business outsourcing and energy divisions.

The deal is worth a total of €48 million to the four West Cork Co-ops and Dairygold. Senior management will walk away with €16m over time.

After 12 months €42.5m will be paid over to Dairygold, Bandon, Drinagh, Barryroe and Lisavaird and to the management who held a reduced 25% stake in the business.

Dairygold, Drinagh and Lisavaird voted in favour of the deal, putting six of the eight SWS board votes behind the offer from Philip Lynch, chief executive, IAWS.

Both Bandon and Barryroe co-ops voted against the offer.

Nearly €22m of the offer is contingent on certain profit targets being met.

It is unclear at this stage if key management will stay with the business given the difficult history with the co-op owners and more recently with Mr Lynch.

Some of the most senior executives became implacably opposed to the merger as the process wore on and up to the 11th hour tried to dissuade the owners from proceeding with the Lynch offer.

They had genuine concerns that the investment in NTR of €130 million by Mr Lynch would militate against a full flotation of the enlarged business and were concerned the future potential of SWS might be compromised.

The €64m on offer is to be paid out over four years.

Meanwhile, Mr Lynch, will summon shareholders in IAWS Co-op to a meeting where they will vote on changing the status of the co-operative.

If that vote is positive then Mr Lynch will move to create a market in the shares.

A full listing is the preferred option but key SWS management are worried that option has been badly compromised. The big question is whether institutions or ordinary investors will want to buy into the enlarged company.

IAWS currently owns Irish Pride Bakery and Premier Proteins in Ballinasloe.

It has a 45% stake in French fertiliser group Cedest Engrais; 33% of Malting company of Ireland and a half share in Greencore Ferry Services.

For €64m it has acquired the energy division waste and business outsourcing operations.

Future funding was a major problem. The businesses will require capital investment of €150m over the next few years and the West Cork Co-ops, with the exception of Lisavaird, did not have the money to fund that kind investment.

"That was what finally swung the deal in IAWS's favour in the end," a source close to the bid process said.